Recent amendments to the Federal Law on Customs Regulation
in Russia (as amended by Federal Law No. 115-FZ on Amendments to the
Federal Law on Customs Regulation in the Russian Federation of May 5,
2014 with respect to the institution of authorized economic operator)
(the "Law") have made the status of authorized economic operator (AEO)
even more attractive for businesses.

The amendments affect both the conceptual framework and the
practical aspects of the Law. The amendments can be regarded as largely
positive.

An AEO is a legal entity incorporated under the law of a
member state of the Customs Union that meets certain requirements
and has been entered in a special register. Under the current
legislation, a wide range of entities — from manufacturers, importers,
exporters, customs brokers, customs carriers, intermediaries,
distributors, to other persons involved in one way or another with
foreign economic activities — are eligible for this favorable status.
The amendments made to the law with respect to the concept of AEO unify
the advantages that AEO status gives to manufacturers and other kinds
of entity (retailers, service providers).

The customs authorities assign AEO status to legal entities
by entering them into the Register of Authorized Economic Operators. One
of the conditions for admission to the Register is the provision of a
minimum 1 million euros security deposit for customs payments (50,000
euros for manufacturing companies and exporters). The AEO also enters
into an agreement with customs authorities establishing the method
and procedure by which they will work together, and receives the right
to use certain simplified customs procedures.

Practical amendments include, in particular, the following:

• The time needed for the release of goods has been specified and shortened;

• The ability to release goods before filing a declaration
without calculating the security deposit for each shipment of goods has
been established;

• Unnecessary documents have been removed from the list
of documents required for registration of an AEO (for example,
information on the organizational structure of the company and its
founders, members of the board of directors, foreign counterparties);

• Security for the payment of customs charges may be
provided either when the company files documents, or once the customs
authorities have verified the documents and decided to enter the company
in the register of AEOs (within 60 calendar days of the preliminary
decision on compliance with registration conditions being met);

• The customs authority does not have the right to revoke
an AEO's certificate until fines incurred for administrative violations
exceed 3% of the total customs payments paid by the company in the said
period.

Notably, most of the amendments to the law with respect
to improving the institution of authorized economic operator are
consistent with the corresponding road map approved by the government
and drawn up in consideration of the wishes of the business community.

The changes to the AEO regulations described above are not
final. The Eurasian Economic Commission has drafted an "improved" AEO
concept, which is included in the draft Customs Code of the Eurasian
Economic Union currently being agreed. The improved concept makes
a number of substantive changes to the existing one. For example,
financial stability and security (reliability) requirements are planned
for companies wishing to obtain AEO status, including for the purpose
of minimizing the application of risk management systems with respect
to such companies. However, it is too early to comment on this concept,
given that the Customs Code of the Eurasian Economic Union has yet to be
approved.

More than 100 companies have already been entered in the Russian Register of Authorized Economic Operators.

AEO status allows use of the following simplified procedures:

• Processing and completion of goods delivery to the AEO's warehouse;

• Temporary storage of foreign goods in the AEO's warehouse;

• Release of goods before filing of the customs declaration, and others.

One of the greatest benefits is the ability to deliver
imported goods to an AEO's warehouse without going through the internal
customs authority. Effectively, this simplified procedure means that
when importing foreign goods consigned to the AEO's address, the carrier
enters the goods into the customs transit procedure at the border
customs authority as usual. The advantage is that the carrier can then
deliver the goods straight to the AEO's warehouse or other territory
without first delivering the goods to the internal customs authority
for completion of the customs transit procedure. Once the goods have
been unloaded at the AEO's warehouse, the carrier files the necessary
documents with the internal customs authority to complete the customs
transit procedure.

Other benefits for AEOs include: exemption from standard
risk profiling with respect to imported products (which results in fewer
customs inspections); a reputation as a good faith participant
in foreign economic activity, and others.

At the same time, since the launch of the AEO institution
in 2012, there have been certain difficulties in realizing
the above-described simplified procedures. One example is the simplified
procedure for goods imported into Russia under contracts with suppliers
registered in certain low tax jurisdictions. The customs authorities do
not allow AEOs to use the simplified procedure for such deliveries.

The expert opinion is that highly favorable conditions have
been created for companies that are considering obtaining AEO status
to implement their plans. However, should the improved concept enter
into force, it will become much harder for applicants to obtain AEO
status.